Commercial Projects Deferred Owing To Slowdown

Commercial real estate projects in their initial stages of planning or construction may get deferred owing to slow down in construction funding and shortage of workers, further impacting the pace of upcoming supply, said CRISIL Research. The economic impact of the pandemic may result in corporates rationalizing operational expenses across departments, including lease rents. If WFH trends continue to gather momentum, they could weigh heavily on vacancy levels.  In the short term, or at least until a vaccine is available, increased social distancing norms--more square foot per employee--will lead to 20-50% of employees across sectors getting displaced. While companies may not take up additional office space in the current scenario, they will most likely utilize their existing office space in light of employee health and safety measures. This will ensure existing vacancy levels in grade A office spaces across cities remain range-bound. CRISIL highlighted another important factor of the lock-in clause of the rent agreement. If companies are within their lock-in phase, there is less likelihood of downsizing of office space requirements. These factors, along with limited fresh supply, will help allay the impact of WFH to an extent.